VeChain‘s Stablecoin, VeUSD, explained

2022-07-21, 04:32

TL: DR

VeUSD is a stablecoin built on the VeChainThor blockchain.
VeUSD was developed by the VeChain Foundation in collaboration with Stably and pegged with US Dollar at a 1:1 ratio.
The stablecoin is based on VIP 180, similar to ERC 20 on the Ethereum Blockchain, which opens a new vista for the VeChain network to DeFi and Web 3.
The VeChainThor blockchain operates a proof-of-authority consensus mechanism that uses a reputation system to select validators.
VeUSD is a liquidity asset that can be traded to respond to the volatility of demand a d supply.

Keywords: VeChain, VeUSD, Stablecoin, VIP 180, Proof-of-Authority, Consensus mechanism, Supply Chain, Logistics

VeUSD is a stablecoin built on the VechainThor blockchain to maintain a 1:1 ratio with the U.S. Dollar. Stablecoins are typically linked to fiat currencies, other cryptocurrencies, or an algorithm to ensure a stable value against market volatility. VeUSD token, which follows the VIP 180 standard, is fiat-backed and designed to support many use cases, including smart contracts.
VIP 180 is based on a proof-of-authority consensus mechanism, a reputation system where others select vital participants to validate and operate the network.

VeChain Foundation on Medium

In January this year, VeChain announced the introduction of its stablecoin VeUSD, although it was still in development then. The public minting portal for the stablecoin on Stably prime went live on 14 March 2022, marking a new era for the VeChainThor public blockchain. The stablecoin, which was finally launched in May 2022, was developed by the VeChain Foundation in partnership with Stably, a U.S. -based asset tokenization company. Following the launch, the Exchange liquidity protocol on the VeChainThor blockchain was the first platform to integrate VeUSD enabling users to trade the stablecoin and withdraw cash through Stably Prime.

What is VeChainThor Blockchain?

The VeChainThor Blockchain is an open-source platform officially launched in 2015. It took off as a subsidiary of BitSe, one of the largest blockchain companies in China, while it is currently run by a large team of workers spread across the globe. VeChain offers blockchain-as-a-service (BaaS) products to customers, mainly in logistics and data management. It aims to enable mass adoption of blockchain technology by removing hurdles and lowering entry barriers for businesses and developers. The blockchain uses a proof-of-authority mechanism to track which transactions are accepted and added to the network. The requirements of the proof-of-authority include:

· Identification: to work, proof-of-authority requires formal identification of on-chain users
· Reputation system: the eligibility for participation in the proof-of-authority is not open to everyone who trades but based on specific criteria, such as a good reputation or being connected to a particular organization.
· Conformity with rules: the proof-of-authority requires total conformity to the procedures and rules of the VeChainThor blockchain.

The VeChain Foundation focuses mainly on supply chain and logistic needs, allowing companies to create Dapps that work to address their desires in these areas. It developed the DApp creation tool- ToolChain, for businesses to use in creating their own solutions. Some high-profile companies that use DApp on VeChainThor include BMW, which uses it to combat odometer fraud. The leading American supermarket Walmart uses a DApp on the blockchain to track where its food comes from. The luxury goods company LVMH uses DApp to trail its luxury leather products.

VeUSD Explained

VeUSD is the first stablecoin on the VeChainThor network, fully backed and redeemable for USD at a 1:1 ratio. Before the launch of the Stably USD, the blockchain supported two native tokens VeChain token (VET) and the VeThor token (VEHO). According to the VeChain team, VeUSD is expected to play a critical role in their DeFi ecosystem as a fiat-backed stablecoin solution on the network. A non-volatile asset such as VeUSD, they said, is a necessary medium of exchange to enable protocols to be successful. As a stablecoin, VeUSD will avoid the fluctuations of traditional cryptocurrencies through physical fiat backing. It is also expected to retain its unique characteristics powering such scenarios where cross-border payments are made quickly and seamlessly, environmental remediation, and providing easily accessible digital wallets for unbanked areas of the world. VeChain Foundation contracted the development of the stablecoin to Stably because of their strict compliance with global authorities. The foundation believes that compliance is critical for mass adoption. VeUSD stablecoins minted are fully backed by physical fiat money reserves that can be redeemed at a 1:1 ratio at any time. The foundation selected Prime Trust, a Nevada-chartered trust company, to monitor and audit fiat accounts and act as a regulated administrator. With this in mind, users can rest assured that VeUSD provides a fully compliant solution with a guarantee of dollar value.

Both enterprises and individuals can mint and burn VeUSD on the Stably Prime platform. It only requires a user to create an account on the platform, deposit USD, and convert it to VeUSD. Users can also deposit other types of stablecoin on Stably Prime, convert them to USD and then convert the resulting balances to VeUSD.

Stably is a fintech company founded in April 2018. Prime Trust, a Nevada-state trust company that provides custody, processing, and compliance services, offers a self-directed custodial account through Stably. This custodial account is known as Stably Prime, the platform on which VeUSD is traded.
Stably strives to make financial transactions faster, cheaper, and more efficient through its digital asset platform powered by blockchain. When you trade VeUSD on Vexchange, you can use Stably Prime to withdraw it directly to your bank account.

Benefits of VeUSD

1. VeUSD is a physical fiat-collateralized stablecoin and a liquid asset that can be traded to respond to demand and supply volatility.
2. VeUSD has a lower chance of losing its peg of 1:1 ratio with the USD because of the fiat backing and the risk and compliance measure.
3. The compliance level of VeUSD is high, as reflected in the choice of Stably as the vendor to develop it.
4. VeUSD is based on VIP 180, similar to ERC 20 on the Ethereum blockchain, which opens VeChain to DeFi and Web 3.
5. VeUSD has a wide range of other uses like the other native tokens of the VeChainThor blockchain, which include supply systems and settlement.
6. VeUSD also serves the functions of the traditional cryptos, such as fast and easy transactions and transfers.

Conclusion

VeUSD is a liquid stablecoin that looks promising. It is hoped that it will unlock new functionality and applications for the VeChain community, partners, and users. The VeChain foundation factored compliance into developing the stablecoin, knowing that compliance is crucial for wide and ubiquitous adoption. It is expected that other exchanges will list VeUSD on their platform soon to signify the steps toward fulfillment of the mission of the VeChain Foundation to empower change, transitioning the global economy to a more sustainable state.

Author: Gate.io Observer: M. Olatunji
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